Bitcoin Stabilizes Above $45k, US Inflation Hits 7.5% Year Over Year

Bitcoin price rallied to $45k after dipping below $44k as analysts indicated likely changes for the flagship cryptocurrency. The release of US inflation rates appears to have had no effect on the king cryptocurrency.

Bitcoin price broke through a crucial barrier overnight on Wednesday, reaching $45,300, before falling as the broader market fell in early trading after US markets opened.

Bitcoin unaffected by inflation rates

During the last 24 hours, BTC/USD has moved in a range of $43,402.81 – $45,398.91, exhibiting high volatility. Trading volume increased by 16.21% to $28.8 billion, while the overall market capitalization is around $860.47 billion, giving a 42% market dominance.

As investors parsed the new US inflation data, which came in at 7.5% yoy vs. 7.3% expected, the earlier drop took shape. Risk assets like cryptocurrencies and stocks have reacted negatively, with all eyes on the next Federal Reserve rate hike in March.

BTC/USD stabilizes above $45k. Source: TradingView

Despite being 0.2% higher than forecast, rising inflation did not have the same favorable impact on risky assets like Bitcoin that it has in recent months.

The S&P 500 fell 0.23%, the Nasdaq Composite fell 0.18% and the Dow Jones Industrial Average held just above the flat line.

According to analysts, the Federal Reserve may now have additional motivation to start raising interest rates sooner due to the speed of year-over-year price increases.

Crypto trader and analyst Michael van de Poppe observed:

“Consumer Price Index (CPI) results for the US are coming in at 7.5% year over year, expectations were 7.3% year over year. The DXY dollar is soaring and risky assets are falling like Bitcoin. and actions. Likelihood that the Fed will start raising rates in March.”

For economist Lyn Alden, however, it was the cash savers who had lost the most to inflation. her indicated next to a graph:

Chart of US CPI rates vs. effective fed funds. Source: Lyn Alden/Twitter

“Official inflation currently has its largest gap relative to short-term interest rates since 1951. People who had cash in a bank or Treasury bills in the last year lost more than 7% of their purchasing power.”

Related article | Investors take refuge in Bitcoin as inflation rises

BTC will hit $50k in short order

The Fed will be put to the test here as they expected a steady tightening cycle rather than a hasty tightening that would appear to be a policy mistake. Political pressure on the Biden administration and the Democrats will increase as core inflation exceeds the Fed’s target and real average hourly earnings fall. Although November is still a long way off, this inflation report shows that prices are rising everywhere and there is growing opposition to further fiscal stimulus measures that would exacerbate price pressures.

With investors predicting that price pressures may be peaking just before the Fed’s monetary policy meeting in March, US stocks have recovered most of their inflation-related losses.

Given the rise in global bond yields, Bitcoin prices are holding up well. Bitcoin’s optimal future environment is risk appetite, which may be difficult to achieve until after the first Fed rate hikes. Institutional investors in Bitcoin are focusing on Treasuries because the trade momentum appears to be pretty simple. In the short term, Bitcoin appears to be settling between $40,000 and $50,000.

Gemini co-founder Cameron Winklevoss feels that Bitcoin remains the best hedge against inflation, corroborating the thoughts of the crypto community and even major investors.

Inflation reached 7.5% in January. The highest in four decades. Keep accelerating.

The best way to protect yourself from this pernicious and silent tax on your life’s work (your blood, sweat, and tears) is bitcoin.

—Cameron Winklevoss (@cameron) February 10, 2022